Executive Disorder?

This post wades into some tumultuous waters, so before we begin, please understand: Nothing we write here is an endorsement or a rejection of any policy measure taken. We are merely assessing the market impact of President Donald Trump’s executive orders, pure and simple. As ever, we favor no politician nor any party and advise investors to set politics aside to the greatest degree possible.

One of the toughest things to do as an investor is budget your time. There is a huge array of information: Some good, some bad, some merely opinion and forecast. Knowing where to spend time and where you are likely to get caught up in needless noise is crucial. Right now, given all the attention paid to President Trump and his first week—which was likely either chaotic or courageous, depending on your political views—this has even greater importance. The raft of executive actions (executive orders, presidential memoranda and proclamations[i]) he signed last week is stirring big emotions, protests and a slew of headlines, but investors should realize: The scope of executive actions is limited; they are usually sociological and rarely (if ever) have a big or lasting market impact.

Markets taught this same lesson throughout President Obama’s tenure, when he used executive actions in an effort to push through favored policy ideas. Most of these (his 2012 and 2014 immigration-related actions, for example) are pure sociology. That doesn’t mean they are unimportant. But stocks don’t move materially on sociological factors, so from the standpoint of thinking about your investments, don’t weight these heavily. Those that were economy-related—like the increase to the Federal minimum wage—were much too small and narrow in nature to impact stocks.

As for Trump, he had a busy first week—no doubt about it. But from a market perspective, the ramifications of his Executive Orders seem no bigger. Here is a tabular run-down of them.

Exhibit 1: Table of Trump

Source: The White House, as of 1/30/2017.

We’re not saying there is no impact. Just that most of the impact is outside of matters pertinent to stocks. Moreover, the ban on refugees and immigrants from seven nations illustrates a further point: Executive orders aren’t unassailable. As many readers likely know, a Brooklyn judge issued a stay blocking the immediate implementation of the order on entrants to the US with a previously issued visa. Moreover, the reaction within the Republican party shows how divisive Trump’s policies are. He is spending a lot of political capital now, which likely brings much less action than investors generally fear later in 2017.

We aren’t saying you should ignore the president’s actions—that is entirely your decision. We are merely suggesting that, when thinking about your portfolio, they may not carry as much weight as the media furor suggests.